Termination of lease and force majeure do not exempt the lessee from payment of rent until actual possession is surrendered.

The appellant was a tenant of the subject premises (No.109, 1st Floor, CS/OCF No.7, Sector-24, Rohini, Delhi) under a Lease Deed dated 06.07.2016.

The respondent purchased the premises on 15.12.2018 and became entitled to rent of Rs.1,50,000/- per month, supported by an NOC dated 19.01.2019 from the erstwhile owner.

The lease provided for a 15% rent enhancement after three years, entitling the respondent to Rs.1,72,500/- per month with effect from 01.10.2019.

Alleging irregular payment, the respondent issued a demand notice dated 05.03.2020; the appellant instead issued a termination notice dated 04.03.2020, claiming the premises lacked facilities for its business.

The learned Arbitrator awarded Rs.18,18,750/- (subject to GST), with pendente lite interest at 9% and future interest at 6.5%.

The appellant's Section 34 petition was dismissed by the learned District Judge vide judgment dated 28.07.2023.

The appellant justified termination on two grounds: the Excise Commissioner's order dated 14.06.2019 making Fire NOC mandatory for restaurants over 90 sq. meters, which the lessor allegedly failed to obtain, and the COVID-19 lockdown.

The Arbitrator found that although termination notice was issued on 04.03.2020, possession was handed over only on 16.03.2021, and accordingly awarded arrears at Rs.1,72,500/- per month from April 2020 to 16.03.2021, totalling Rs.19,83,750/-.

The appellant's counter-claim of Rs.4,50,000/- (security deposit) was allowed and directed to be adjusted against the award.

1. Whether a force majeure event existed — by reason of the Excise order dated 14.06.2019 and/or the COVID-19 lockdown — which entitled the appellant to terminate the lease deed and avoid liability for rent.

2. Whether the appellant was liable to pay arrears of rent at the enhanced rate of Rs.1,72,500/- per month from 01.10.2019 until handing over of possession on 16.03.2021, notwithstanding the termination notice dated 04.03.2020 and the absence of any GST invoice.

3. Whether the findings of the learned Arbitrator, as affirmed by the learned District Judge, warranted interference under Section 37/Section 34 of the Arbitration and Conciliation Act, 1996.

Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, which circumscribe the scope of judicial review of arbitral awards and preclude re-appreciation of findings of fact.

Section 108(e) of the Transfer of Property Act, 1882, which provides that where by fire, tempest, flood, violence of an army or mob, or other irresistible force any material part of the leased property is wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void.

Clause 2.3 of the lease deed empowered the lessor to enhance rent by 15% after three years.

Clause 7 (the force majeure clause) conferred on the lessee a right to terminate or seek pro-rata adjustment only where a force majeure event rendered the demised premises uninhabitable or difficult to use for a period exceeding 60 days.

Applying the limited standard of review, the court noted that the appellant did not contest the findings of fact recorded by the Arbitrator, including that possession was retained until 16.03.2021 despite the termination notice dated 04.03.2020; accordingly, the award of arrears from April 2020 to 16.03.2021 at the contractual rate of Rs.1,72,500/- per month was justified.

The court rejected the force majeure contention, holding that neither Clause 7 nor Section 108(e) of the TP Act availed the appellant, as those provisions address destruction or permanent unfitness of the premises itself, whereas the COVID-19 restrictions merely affected the appellant's ability to conduct business — a distinction underscored by the Arbitrator's observation that the pandemic "affected the mind and body of the person," not the subject premises.

The plea that the pandemic frustrated the contract post-March 2020 was expressly found "not appealing".

On the enhancement of rent, the court found no dispute that the lease deed entitled the respondent to the escalated rate, rendering sustainable both the differential rent from 01.10.2019 to February 2020 and the monthly rent of Rs.1,72,500/- from March 2020 onwards.

The finding regarding alleged deficiencies in the premises stood fortified by the appellant's failure to question the respondent's witness in cross-examination on any specific deficiency, a finding of fact immune from Section 34 scrutiny.

The conclusions of the learned Arbitrator and the learned District Judge were found justified; the impugned judgment dated 28.07.2023 required no interference. The appeal under Section 37 and the pending application were dismissed, leaving intact the award of Rs.18,18,750/- (subject to GST, along with pendente lite interest at 9% and future interest at 6.5%), with the appellant entitled to adjustment of its security deposit of Rs.4,50,000/- against the awarded amount.